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CRHDC doing feasibility study on funding for old middle school project

Nonprofit met with Re-3 School Board about possibility; answer may come by August

By Jenni Grubbs

Times Staff Writer

Posted:
05/26/2016 09:57:36 AM MDT

Carly Johansson

The Morgan County Re-3 Board of Education could know by August whether its top option for what to do with the old middle school will be possible.

That most-preferred option was working with the Community Resources & Housing Development Corp. for the nonprofit to take over and repurpose the old building for a mix of housing and community uses.

The school board recently held a work session with Carly Johansson from CRHDC and Monica Clark Peterson from financing consultant firm S.B. Clark, Inc., which works with the nonprofit, to discuss whether what the school district was looking for might be possible.

After lots of discussion, the short answer from Johansson and Clark Peterson was that they should be able to give the school district a yes or no by late August on moving forward.

But moving forward likely still would mean a lengthy process of applying for public funding in the forms of grants and housing tax credits to finance the project.

And it's a project that would be like nothing CRHDC has done before, since it would need to incorporate the community-use aspects of the current building in the gym, auditorium and kitchen, not just turning the whole facility into housing.

Filling needs for housing for agricultural workers and their families was the focus of CRHDC just-opened project in Fort Morgan, the 50-unit Sol Naciente development.

If CRHDC determines that taking over the middle school building and property from the school district is feasible for the nonprofit, then it likely would be for a mixed-use development because of those amenities that remain important to the community.

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The feasibility study CRHDC will do is more related to funding, rather than possible uses, which was the focus of the one done by University of Colorado Denver graduate students for the school district.

"I think it's a fascinating project," Johansson told the school board, district officials and a couple members of the study committee who attended the work session.

She said she contacted Clark Peterson because she was "going to need her help to figure out how feasible it is."

One thing that helped, Johansson said, was that the CU Denver study had determined what might be possible as far as how many units could be put into the existing building while keeping the community amenities.

Clark Peterson discussed some of the funding options and mechanisms that they might be able to use to cover the costs of the project and make that aspect potentially feasible. They included seeking low-income housing tax credits and pairing that with bonding, as well as possibly new market financing.

The big question now for CRHDC and S.B. Clark was: "How do you finance something as exciting as your community wants in a way that's not too burdening on the community?" Clark Peterson stated.

She had some ideas in mind, but none of them would happen overnight or be completely settled even in the next year, she cautioned.

"Rural projects are popular, but the timing ... is going to be an interesting timeline," Clark Peterson said. "New markets (funding) is not on a very stable footing, and (funding awards) are announced one or two times a year."

But that is only one part of what could work for funding this project, she told the school board.

Another part of this puzzle, Johansson pointed out, is whether CRHDC would be the combination of owner, developer and operator for the project, or have another nonprofit involved with one or some of those aspects to make grant or tax-credit applications more attractive to the people making decisions.

One of the issues, she said, was that CRHDC was awarded the tax credits for Sol Naciente in this area, so it might be harder to get them again here in Fort Morgan so soon.

Another potential issue is that CRHDC already has a senior housing project in the works elsewhere in Colorado that is seeking tax credits, and it likely would be out in front of the middle school on the nonprofit's priority list. That could push the timeline back even further for the middle school project in Fort Morgan.

Re-3 Superintendent Ron Echols pointed out that he was hearing that it could be two years before it was decided what would happen.

Johansson affirmed that it can take a long time before her nonprofit gets awarded the tax credits and funding options they seek, but "once our organization commits to a project, we keep going until it gets funded and happens."

She also acknowledged that the school district may not be willing to wait until those funding puzzle pieces fell into place to no longer own the building and land and be responsible for it.

"Overall, I know that the school board's interest is in not owning and managing this property," Johansson said.

And depending upon what the feasibility study shows, CRHDC may be willing to take on the property long before final plans were determined, she said.

There could me a mix of renting out the existing amenities to cover maintenance costs or other possibilities.

Clark Peterson offered some scenarios for what the feasibility study would look at for funding possibilities for the conversion project. A big question would be whether it would have to include 9 percent low-income housing tax credits or be OK with the easier-to-get 4 percent low-income housing tax credits, and then what other funding options could be "piled on" with those.

"It's a little bit complicated, but it's definitely do-able," she said. "We'll get a lot of clarity this summer as we crunch the numbers."

Re-3 Assistant Superintendent Ron Pflug asked whether it still sounded possible to Johansson and Clark Peterson to seek funding for the type of mixed-use development the community had said it wanted on this site, and the two women said it was.

"That's what we hear from the community: Don't lose use of the gym and the auditorium. Make it a mixed use for housing and commercial," Pflug reiterated.

The question looming for Johansson and Clark Peterson was what the costs would be for turning the building and land into that and whether they could figure out how to make the financing numbers work.

But CRHDC is on board for figuring that out, having already contracted with S.B. Clark to do the feasibility study on the potential project.

"It'll give us a plan and show which of the models that we stress test will meet your needs and be possible," Clark Peterson told the school board.

Echols again expressed concerns about the lengthy and indeterminate timeline, but he did add that "teaming with an organization like (CRHDC) is what we want to do."

In the meantime, something the school district could do would be working with the city on getting the land rezoned, she said.

"That process shouldn't wait," Johansson told the school board. "That's what's going to make it more attractive to developers," even if it's not CRHDC that ends up redeveloping it.

Regardless, Johansson said she would work with the school district and the city on the rezoning process, but asked the district to pay the related fees that she said were "not expensive." She also brought this up because getting the property rezoned would make any applications for tax credits "more competitive."

Bottom line for the school board was that CRHDC was willing to look into the various options for being able to take on and complete the repurposing of the middle school building and property — and spend money on making that determination. If it turns out to be a favorable one for the project and funding it, CRHDC then would look at taking on the middle school property and working toward getting the funding to make it happen.

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